The settlement with MPHJ, announced in November 2014, is the first time the FTC has taken action using its consumer protection authority against a patent assertion entity. Patent assertion entities are companies that buy the rights to patents and try to generate revenue by licensing to or litigating against those who are or may be using patented technology.

According to the FTC’s administrative complaint, MPHJ bought patents relating to network computer scanning technology, and then told thousands of small businesses that they were likely violating the patents and should purchase a license. MPHJ sent letters that falsely represented that many other companies had already agreed to pay thousands of dollars for licenses, the complaint alleges. Additional letters were sent in the name of MPHJ’s law firm, Farney Daniels, P.C., that falsely threatened the recipients with patent infringement lawsuits, according to the complaint.

Under the final order, MPHJ, Farney Daniels, and MPHJ’s owner, Jay Mac Rust, are prohibited, when asserting patent rights, from making false or unsubstantiated representations that a patent has been licensed in substantial numbers or has been licensed at particular prices. The order also prohibits misrepresentations that a lawsuit will be initiated and about the imminence of such a lawsuit.

The Commission vote approving the final order was 5-0.

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